Dollar Sibor may be discontinued

Singapore’s central bank will probably announce changes to the benchmark rates and the process for setting them by the end of June.

Singapore: Singapore’s central bank and a group of lenders are considering putting an end to the city-state’s US dollar-linked interbank lending rate as regulators worldwide probe allegations of rigged benchmark borrowing costs, a person with knowledge of the matter said.

Members of the Singapore Foreign Exchange Market Committee examined the proposal in a 22 January meeting, during a discussion of the Monetary Authority of Singapore’s review of benchmark rates, said the person, who asked not to be identified as the discussions are confidential. The group may instead use the US dollar London interbank offered rate, the person said.

The banks are reviewing the process for setting the Singapore interbank offered rates amid a probe into the manipulation of key interest rates spanning markets from the US and the UK to Hong Kong and Japan. Barclays Plc, UBS AG and Royal Bank of Scotland Group Plc have been penalized $2.6 billion for rigging the UK’s Libor, and the scandal is now set to engulf interdealer brokers such as ICAP Plc.

Singapore’s central bank will probably announce changes to the benchmark rates and the process for setting them by the end of June, the person said. The Monetary Authority of Singapore doesn’t comment on its internal operations, a spokesperson for the regulator said on 15 February.

Sibor, used to price debt ranging from commercial term-loans to homeowners’ mortgages, is calculated on behalf of the Association of Banks in Singapore. Each day, the 12 contributing banks are asked how much it would cost to borrow Singapore dollars from each other for different periods from one month to 12 months. The three highest and lowest quotes are excluded, and the six in the middle of the range are averaged and published at 11.30am in Singapore.

The process of setting the benchmark rates is still under review, Ong-Ang Ai Boon, a director at the Association of Banks in Singapore, said. She declined to comment further.

In July, the Monetary Authority of Singapore said it’s looking into how banks set key interest rates, mirroring reviews under way in financial centres from Sweden to South Korea.

The city-state’s regulator is working with the group of banks and the currency traders’ committee to review how Sibor can be strengthened, and has also directed the banks to independently review their internal submission processes, Lawrence Wong, a senior minister of state who sits on the monetary authority’s board, said in Singapore’s parliament on 10 September.

On 24 September, the central bank said it asked the banks to extend their review to include non-deliverable forwards, a derivative traders use to speculate on the movement of currencies that are subject to domestic foreign exchange restrictions. UBS, based in Zurich, and RBS suspended at least three traders in Singapore as part of probes into the manipulation of those rates, two people with knowledge of the matter said in October. BLOOMBERG